There is general optimism that the number of bankruptcies and compulsory windings-up in Hong Kong will not exceed the peak recorded during the severe acute respiratory syndrome (Sars) epidemic in 2003, according to a recent joint survey conducted by CPA Australia Hong Kong China Division and Deloitte China. The survey assessed the impact of the global financial crisis on the Hong Kong economy and local businesses. It revealed that the outlook among companies towards recovery in Hong Kong, their perspectives on the city's restructuring and insolvency regimes, and their approach towards tackling the financial crisis. The survey covered senior executives in Hong Kong, the mainland and other parts of the region. The findings revealed that more than 85 per cent of respondents did not expect the annual number of bankruptcy orders to exceed 25,000, the peak during the Sars epidemic. Additionally, nearly 80 per cent said that the number of compulsory windings-up would not exceed the peak of 1,200 per annum recorded during the same Sars period. Derek Lai, Asia leader of reorganisation services at Deloitte China, warned businesses to stay alert to threats from the financial crisis despite growing market optimism. 'Respondents generally agreed that banking and finance, air and transport services and manufacturing were the most affected sectors in the financial crisis. From our observation, the export-driven manufacturing sector will remain fragile in the near term,' he said. In the survey, respondents cited declining market demand and sales orders, tightening of credit terms from lenders and insufficient cash flow as the most common problems faced by companies. Identification of non-core or underperforming businesses and/or assets for disposal or cessation, financial restructuring and exploring new market/business opportunities were perceived as the most effective solutions. Lai said: 'Prevention is always the best cure. Instead of identifying solutions when problems arise, companies should regularly assess the impact of the economic climate on their business. 'To avoid a cash shortage, it is crucial to manage your cash position and maintain a solid relationship with banks. In some cases, companies should opt for disposal of non-core or underperforming assets, business restructuring or even a corporate rescue.' The survey also revealed perspectives on the restructuring and insolvency regimes in Hong Kong. Some 64 per cent of respondents considered the systems effective. Among those who perceived the regimes to be ineffective, 51 per cent cited the absence of appropriate insolvency laws governing restructuring in Hong Kong as the root of the perceived ineffectiveness.